Two for Tuesday SQ vs FOUR
SQ was founded in 2009 and provides payment-acquiring services to merchants. The company also has the Cash App making person-to-person payment easy. Formerly known as Square, Block currently has operations in US, UK, Canda, Japan and Australia.
FOUR is a provider of integrated payment processing and technology solutions. Shift4 Payments allows software providers a single integration to an end-to-end payment offering, a powerful gateway and robust suite of technology solutions.
Full disclosure: We currently own SQ.
So let’s compare the two:
Price since May 6 2020 (FOUR IPO date) until the close of March 24 2023, FOUR has been the clear winner with an almost 100% move up.
FOUR is also leading in Revenue by just over 20% margin.
Cash from operations and once again FOUR is the winner here.
Operating Margin and FOUR is slightly ahead.
And once again, FOUR is streaks ahead with Free Cash Flow.
Last week Hindenburg issued a short report on Block and the stock dropped 15%. From my understanding, Hindenburg is a small research company employing fewer than 10 people specialising in financial forensic research. They often take large short positions prior to the release of a pending report. Questionable behaviour, some might well argue!
As with any form of research or analysis, it is always best to do your own research. We did just that with the Hindenburg short report on SQ and while there may well be some fraudulent accounts and transactions, this is most certainly not limited to SQ.
The other point is the number of accounts does not tally up with the number of users. Most likely accurate with some users having multiple accounts but, again, I’m sure PYPL and other companies have a similar problem.
Controls are not strict enough. Again, most likely true but the same can be said and has been said many times for banks.
As already mentioned, we own SQ but if we decide to exit this trade, it would not be based on the short report from Hindenburg. However, an exit from SQ might be a reason for an entry into FOUR as it certainly does look interesting.
Let's go trade!
